“Sometimes we lost out to others and some were just poor properties,†says Jahmal, a civil engineer with the North Carolina Department of Transportation. Angela works as a professional development consultant at a regional bank. The Pullens considered nearly a dozen properties before they found the one they eventually bought. No matter how competitive the market got, the couple stuck to their plan–and their budget.
The Pullens personally inspected many of the properties and got estimates on necessary repairs. If they decided the property was a good deal, they would make an offer. In the end, they purchased a home for $47,000, paying $11,750 as a down payment. They had estimated that repairs would cost them from $7,000 to $10,000, which included new carpeting, tiling, bathroom fixtures, painting, general maintenance, and some appliances. The actual repairs totaled nearly $7,400.
Meet the Robinsons
The Pullens are hardly unique. Last May, the housing bust allowed Chris and Melanie Robinson to score one of their best real estate deals ever. Chris, an Air Force pilot, has been stationed in several states over the course of his seven-year career. In many of the places the couple has lived, they’ve purchased housing and leased to tenants. Currently in Macon, Georgia, Chris, 29, and Melanie, 28, were scouring properties and crunching numbers last spring when they spotted a duplex that was initially listed for $150,000. As luck would have it, just before they were about to make an offer, the owner cut the price in half, to $75,000. The Robinsons contracted to buy the home two days later.
In all, Chris and Melanie currently own four rental properties in two states–two fourplexes, one duplex, and one single-family home. Together the properties generate a monthly profit of $1,400. “We don’t buy anything if it’s going to have a negative cash flow,†says Melanie, a process engineer for a manufacturing plant, who along with her husband took a real estate course that included a section on analyzing property. She says most potential landlords remember to add costs such as taxes, insurance, and homeowners’ fees when calculating monthly cash flow. But many forget about other expenses such as maintenance, advertising, and tenant vacancies. Experts say that landlords lose about 1% of annual property income due to periodic tenant vacancies.